Aite Group expects FX algorithms to account for more than 25% of FX trade volume by the end of 2014. Boston, September 13, 2011 – A new report from Aite Group examines key market trends driving algorithmic foreign exchange (FX) adoption, and analyzes existing challenges to market growth.
Algorithmic trading in FX failed to garner wide adoption until recently, but client interest has increased in recent years, driven in large part by traders’ desire to create greater transparency and execution performance measurement. The emergence of foreign exchange as a legitimate asset class has resulted in rapid adoption of electronic trading in the FX market.
Boston, MA, September 2, 2008 – A new report from Aite Group, LLC examines the use of algorithmic trading in the foreign exchange (FX) markets. In recent years, the FX market has witnessed the emergence of a new trend in electronic trading: algorithmic trading strategies designed to capture execution opportunities in an increasingly automated and fragmented marketplace.
It also highlights a few leading FX banks that currently offer algorithmic trading services, including Citi, Credit Suisse, Deutsche Bank, J.P.

Clients used to algorithms in equities and futures markets, too, have pushed for the development of algorithms in the FX market.
The report looks at the changing market reality of the FX market, assesses the potential for growth in the adoption of FX algorithmic trading, and identifies possible pitfalls. The use of algorithmic trading is still minimal in the A-share market; the situation is slightly more optimistic in the B-share market. Aite Group interviewed 12 actively trading asset managers, hedge funds, and proprietary trading firms to glean information regarding the overall development of the FX algorithmic trading marketplace.
However, while the development and marketing of third-party FX execution algorithms is on the rise, leading FX banks have found more opportunities in providing market aggregation, creating sophisticated order types, and implementing smart order routing technology. On the other hand, algorithmic trading is actively used in the stock index futures market.In a new report, Algorithmic Trading in China, Celent examines the market size, investor segments, regulations, software providers and market data vendors supporting advanced execution in China. Overall, Aite Group expects FX algorithms to account for more than 25% of FX trade volume by the end of 2014, up from 7% at the end of 2010.

Aite Group estimates that approximately 7% of all FX trading is currently conducted through algorithmic trading, driven by algorithms that represent both investment and execution-based trading strategies.
Hedge funds and securities firms will be the main customers for algorithmic trading over the next two years.
Rapid improvement will be seen in the market data services sector in order to support algorithmic and high frequency trading.The algorithmic trading vendors active in the China market include Hundsun Technologies, SunGard, TradeBlazer, Webstock, and Tinysoft.
Some Chinese vendors have also developed algorithmic trading systems in collaboration with foreign vendors and financial institutions.
The main differences with these markets include order speed, market data speed, and China’s T+1 trading system,” says Hua Zhang, analyst with Celent’s Asian Financial Services group and author of the report.